Readers of the San Diego Home Blog know that Kris and I spend a lot of our time trying to reveal and anticipate market trends. One that is already apparent and becoming more relevant is the strengthening demand for one-story homes and the relative shortage of these homes. We are increasingly receiving calls from clients who want this product type. Interestingly, although several are retired (or soon-to-be retired) Baby Boomers, others are younger families. But as more and more Baby Boomers approach or enter their 60’s (and beyond) it’s safe to say that the demand will only continue to increase. Why? Because Boomers prefer not to have to climb stairs as we get older. We also want to downsize from the homes where we raised our children and who are now gone. The future will bring a critical supply shortage.
Unlike other growing markets around the country such as Phoenix, Las Vegas, Dallas/Ft. Worth, etc. who all share the common benefit of an abundant supply of inexpensive (or relatively inexpensive) land, San Diego is quickly running out of developable land. Add the extraordinarily complex and expensive compliance requirements of the environmental process (The California Environmental Quality Act, CEQA, is in some cases more stringent than the National Environmental Quality Act, NEPA), as well as the remainder of the land entitlement process in San Diego (2-5 years just to get a Tentative Subdivision Map approved) and one can see why the land basis becomes too expensive for the good old traditional one-story home.
So, how critical is the situation it right now? I checked our local MLS, SANDICOR, for the six Zip Codes that make up most of the I-15 Corridor. This includes Tierrasanta, Scripps Ranch, Mira Mesa, Rancho Penasquitos and Rancho Bernardo (including Carmel Mtn. Ranch and Sabre Springs). Cumulatively, there are currently 643 listings for detached homes in these communities. Within that total there are 230, one-story homes or about 35% of the total inventory. Not bad, right? Except for one thing. Many of our clients are asking for one-story homes less than 10-years old. When I added this criteria to my search, the number of available homes plummeted to 40 or about 6% of the total homes currently on the market. But here is the real clincher: Out of the 40 one-story homes on the market that are fewer than 10-years old, only FOUR of the homes were priced under $1 million. Yikes!!
Therein lies the problem(s)…Due to the high land cost, in order for builders to maximize their return, they commonly created small lots and, with few exceptions, built them out with maximum square feet… the two-story home.
What’s worse is that most of the new home projects in the I-15 Corridor are not building one-story homes. The few that are building these homes are the custom and semi-custom developments with asking prices starting at over $1 million.
So what’s a Boomer (or anyone else) to do? First, if you are currently thinking about getting into a 1-story home, you may want to accelerate your plan. Overall, market prices have softened a bit during the past year but we don’t know how long this trend will last. For example, the past five months in Scripps Ranch have seen the inventory of all detached homes for sale dramatically drop from approximately 158 to just 83 today. Another alternative is to consider a 2-story home with a downstairs master bedroom. But this product type is also relatively rare. A third scenario might be consideration of 1-story homes older than 10 years. There is a larger pool of these homes available and we have seen some fabulous examples of updates/upgrades in these homes. A final (and more drastic) alternative might be a move to another city where one-story homes are in abundance. With no offense to our friends in Phoenix, Dallas or Las Vegas, there’s a reason they are more affordable. There are always tradeoffs…
Conversely, if you currently own a 1-story home, you may want to consider hanging on to it. In good or not-so-good markets, the limited supply should always keep you in a superior position. If your home is older, it’s a good bet that a comprehensive upgrade/update to the home will benefit you in the future, not to mention the enjoyment you will receive every day prior to having to sell.